Free Now Wants To Acquire Bouygues Telecom To Become A Telecom Heavyweight

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The mobile landscape in France is still going through a lot of changes. Three days ago, SFR finally got acquired by Numericable, rejecting Bouygues’ offering for a second time. But when everybody thought that things were about to go back to normal, Le Parisien reported that Bouygues is willing to sell its telecom branch to Free, France’s so-called fourth mobile phone company.

When SFR entered in exclusive talks with Numericable, the acquisition seemed like a done deal. But Bouygues didn’t give up. It made two higher bids so that Vivendi would sell SFR to Bouygues. In the end, it wasn’t enough as SFR still chose Numericable over Bouygues.

As a reminder, if Bouygues acquired SFR, Bouygues was willing to sell its entire cell network to Free for $2.5 billion (€1.8 billion). It was a great deal for Free. But the deal fell apart.

Everything should have gone back to normal. But now, it turns out that Bouygues doesn’t want to compete against two giant telecom companies (Orange and SFR/Numericable) and a young and scrappy competitor (Free). Free has developed a very cost-effective strategy by staying lean.

In other words, Bouygues Telecom won’t have a big network like Orange and SFR, and it won’t be able to compete on price with Free because of operating costs. That’s why Bouygues is now changing its mind and looking for a buyer.

According to Le Parisien, Free is willing to spend $6.9 billion (€5 billion) for Bouygues Telecom’s network, frequency bands and clients. Bouygues would like to get more, but it will be a tough sell.

These days, Free is the only potential buyer on the French market. It sounds unlikely that a big French company jumps on the opportunity to get in the now highly competitive telecom market — margins are very small now. That’s why Bouygues will have a hard time asking for a higher price. The company could be looking for other European companies — Telefonica could be interested.

Free wants to close the deal as quickly as possible so that Bouygues doesn’t have time to find another potential buyer. Free has a small 3G and LTE network and relies a lot on its partnership with Orange. The two companies signed an expensive agreement so that Free can use Orange’s 3G network until 2017 while it is still building its network.

By acquiring Bouygues Telecom, Free would be able to get an entire network much more rapidly. But it wouldn’t be able to be as lean as it is right now, as Bouygues Telecom has a lot more employees than Free. But that problem is still far away as Free has yet to acquire Bouygues Telecom.